Discussion of„Employment risk and the

living arrangements of young adults“

Martin Biewen, University of Mainz

Summary

Does increased employment risk make young Spaniards stay longer with their parents?

Idea: measure employment risk by type of labour contract (temporary vs. permanent)

Problem: potential endogeneity of contract type Solution: seek exogenuous variation driving

contract type: 1) legal time limits 2) subsidization

IV-estimates: no or only weak causal effects of employment risk on decision to leave nest

Comments: 1) General

Relevant and interesting question Paper makes serious effort to identify causal

effect Use of different samples and models Results interesting because they are

unexpected

Comments: 2) LATE

IV-estimate is local average treatment effect Effect only refers to individuals who change contract

type as a consequence of changes of the IV These individuals are not necessarily representative Legal time limits: those individuals who don‘t find

permanent employment before 3 years limit (the less able, less motivated, less emancipated?)

Subsidization: those individuals who wouldn‘t have found permanent employment if subsidization had been lower (the less able, less motivated, less emancipated?)

Comments: 3) Flows approach

Flows approach (= quarterly transitions) doesn‘t seem to contain much information

Incidence of contract changes in sample of individuals with temporary contracts only 2.2 % (! tiny „treatment“ group)

Only a fraction of these will change type due to IV Looking at the coincidence of contract change and

moving out in the same quarter seems restrictive Flows sample only looks at individuals who start

with temporary contract (representative?, efficiency?)

! stocks approach much better

Comments: 4) Data limitations

Provide more info on data in paper Rotating Panel: each individual observed for

„five quarters“ only (p. 13)? In addition: attrition?

Potential Tenure variable: Biographic info? Yearly measure? Sequences of temporary jobs?

Subsidies variable: firm specific? (if so: potentially correlated with unobserved individual characteristics)

Provide more info on incidence of different tempo-rary contracts (one type of contract has a 2 years time limit and one type disappears in´97)

Comments: 5) Specific points If 70% of individuals between 18 and 35 year still

live with parents ! extend age range to observe when individuals actually move out

Age is important variable ! include not only linearly Regressors „Exp“ and „Expc“ (= Exp -3) unclear

(negative values, collinearity?) Why no „stocks regressions“ in subsidies case? Aggregate employment risk: regional unemploy-

ment rate missing in time limits regressions! Better include age-specific unemployment rates

Comments: 5) Specific points

Difference in „employment risk“ between tem-porary and permanent jobs large enough to drive decisions?

12.5 %

2.5 %

Comments: 6) Alternative models

So far, paper doesn‘t exploit information about employment status

Include employment risk explicitly as regressor

„Employment risk“, e.g. Probit of employment status on exogenous variables and instruments

is uncorrelatedwith if and are exogenous

Comments: 7) Alternative models

Timing-of-Events approach (Abbring/V.d.Berg (2003))

No exclusion restrictions needed But: potential problem with anticipation of

conversion

Hazard of conversion to permanent contract

Hazard of leaving parents

unobserved heterogeneity

potential jump in hazard after conversion

Comments: 8) Other explanations

Cultural differences (role of family)/cultural change

Longer education Women‘s emancipation/women‘s

participation in higher education Parents richer than in the past Underdevelopped housing markets (rented

accomodation)? … ?

Conclusion

Good, interesting paper with high potential Some aspects left that warrant a closer look